Why Google’s Eric Schmidt backs this Australian start-up

Gour Lentell has a party trick. The Sydney-based entrepreneur can use an old mobile phone to find stuff on the internet twice as fast as the latest high-powered handsets from Apple or Samsung. It’s the equivalent of pulling up alongside a Ferrari and a Lamborghini in a battered old VW Beetle and chuckling to yourself as they fade into your rear-view mirror when the lights go green.

Lentell’s latest start-up biNu has signed up 4 million customers, largely in Africa and Asia, but has a potential global market of 5 billion people who will use mobile phones as their primary way of accessing the internet.

The potential makes your eyes water. Lentell’s business is making almost any old Nokia behave like an iPhone or Android device. That might not be much of a selling point in the Western world but in other regions, where huge populations are using cheaper handsets on less reliable mobile networks, the added value is obvious.

The company expects to close a $3 million funding round in September and has the backing of Google executive chairman Eric Schmidt and Seek co-founder Paul Bassat. Lentell is about to head to the United States to hold more talks with other potential investors.

Despite biNu making a promising start Lentell is not getting ahead of himself because he has ridden the start-up roller-coaster a couple of times already. He and business partner Dave Turner once sold a company for $100 million in stock only to lose it all when the dotcom bubble burst a few months later.

Parallels can be drawn between the ups and down Lentell has experienced during his career and the volatility of the internet industry during the past three decades. It is a place where dreams are sometimes made but can also be the source of cruel and vivid nightmares. Like most serial entrepreneurs, Lentell has developed an ability to accept his failures, learn from mistakes and take the positives into his next venture.

Born in Zimbabwe, Lentell’s mother was a teacher while his father was a “quite eccentric" businessman who sold jewellery and antiques. As soon as he finished high school, Lentell left the country to avoid serving in the Rhodesian Army and went to live with his father in England.

After finishing university, he started his professional career in the late 1980s as a consultant for PricewaterhouseCoopers in London before coming to Australia with the same company. He also has a four-year stint at business software maker Oracle on his resume, where he worked alongside Turner, but his career took something of a new direction when the pair went to work for OzEmail, a local internet pioneer that counted Malcolm Turnbull among its early investors and was eventually sold to Perth-based internet service provider iiNet in 2005.

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OzEmail had listed on the Nasdaq in 1996 (an ASX listing was to follow two years later) and was cashed up to invest in ideas being hatched by founder Sean Howard.

“I remember sitting down with [OzEmail managing director] David Spence one day and saying ‘I want to work here. I don’t care what it is that I do, this is where I want to be spending my time’," Lentell says. “Oracle was very boring and it was increasingly apparent that the internet was far more interesting than corporate IT."

In its Nasdaq prospectus, OzEmail had promised potential investors that it would have live ASX quotes available on its website by the end of the month. Lentell and Turner were given the task of building it in less than a week. They created the first version of what became known as Stockwatch in four days and it racked up 90,000 hits within 24 hours of launching.

Another of Howard’s ideas was an online advertising venture based on the DoubleClick business that Google acquired in 2007 for $US3.1 billion. Howard needed ad serving technology and again turned to Lentell and Turner, which is how they got involved in Web Wide Media. The team operated out of Malcolm Turnbull’s office for about a year, building the technology to run the business, which was sold to US-based Softbank Interactive Marketing.

A year or two later that business was floundering, so Lentell and Turner did a deal to acquire the intellectual property for the ad serving technology. They formed a start-up called Sabela Media (Sabela is a Zulu word meaning respond to a call). They secured a $2 million private investment from a Japanese family through a business associate and were just a day away from closing a $14 million venture capital round when they were sued by DoubleClick for patent infringement.

After a weekend where potential investors cooled their interest in backing Sabela, DoubleClick made an aggressive bid to acquire the company but another US company, 24/7 Media came in at the eleventh hour with a much higher offer of $US67.5 million ($100 million).

“Within 18 months we had gone from two men and a dog in a services apartment to being acquired for $100 million by a company listed on the Nasdaq," Lentell says. “Along the way I had found myself in meetings on Wall Street with bankers pitching to help us raise money. It was quite a surreal experience."

Sabela was sold in an all-stock deal during January 2000. Lentell developed a habit of checking the share price every morning as soon as he woke and remembers a day in February when he discovered that his shares had added $1 million overnight. Yet three months later the dotcom bubble burst and, over the next couple of years, 24/7 Media’s shares went into freefall.

Having done a deal at $US48 a share, and seeing them peak at $65 a month or two later, he watched in horror as they went through the floor. They eventually hit the bottom at US10¢ and Lentell had lost everything.

“We had restrictions on when we could sell but could have sold some within a few months of the deal," Lentell says.

“It was very difficult to sell when they went underwater and we were convinced they would come back. Of course the opposite happened and they continued to fall. Hindsight tells us that you are best to take some value off the table early on no matter what your long-term view is."

In 2001 Lentell and Turner were introduced to a Sydney-based business called Decide Interactive that was focused on search engine optimisation, or helping businesses make their websites appear high up when people did internet searches using engines like Google and Yahoo!. They invested some of whatever little money they had left to build search engine marketing technology.

Three years later 24/7 Real Media, as it had become known following a merger, acquired Decide Interactive for $40 million.

Although it had a much more complex shareholding structure than Sabela, Lentell and Turner were a bit wiser second time around so did better out of the half cash, half stock deal to sell the business.

After a year working for 24/7 Real Media, Lentell spent the next 18 months sharing parental responsibilities for three children with his wife following the break-up of their marriage.

It wasn’t until 2008 that he and Turner were introduced to a paging company in the Sydney suburb of Belrose called Infostream that would give rise to their latest venture.

Infostream had developed a technology that delivers mobile services to phones over the internet, often referred to these days as cloud computing, rather than building the processing power into the handset. Lentell and Turner bought the intellectual property for $150,000 and have signed up 4 million customers, mostly in Asia and Africa, since launching services about 18 months ago. It is expected to pass a billion page views within the next month.

“Even in Sydney the mobile internet experience isn’t always that great," Lentell says. “So you can imagine what it’s like in Delhi, Jakarta or Lagos. People in these places are price sensitive, have cheaper devices and are lucky to have a home to live in, let alone a computer and a broadband connection. The mobile becomes their primary access to the internet."

Facebook is one of the top three apps in all countries where biNu has become established, from Bangladesh and India to Nigeria and Saudi Arabia, but the service is also used to access more socially important material like books, health information and translation services.

“The average person here might wonder why you’d want to read a book on a mobile phone screen but if you’ve never had access to books, because you can’t afford them and there isn’t a library within reach, it’s a wonderful thing," Lentell says.

The philanthropic bent to biNu’s technology is likely to have been a major factor in Google chairman Eric Schmidt signing off on an investment made by his venture capital firm TomorrowVentures.

Lentell has never met Schmidt but is hopeful the opportunity may present itself one day if biNu fulfils its potential.

Yet as one of the venture fund’s managers pointed out to him, this is a remote possibility because “even a really successful exit wouldn’t move the dial on Eric’s net value".